U.S. Affluence

The poorest people in the U.S. are richer than most of the higher income individuals in other countries. Specifically, the poorest 5% of all Americans rank 68% in terms of world incomes. In other words, our poorest are richer than 2/3 of the world (p. 117).

The Economic Lesson

While Dr. Milanovic is looking at worldwide income distribution, we can also look at income distribution at home. In the U.S., our national income comes from wages and salaries, rent, interest, dividends and profits from businesses that are not incorporated.

To picture our income distribution, please think of a pie as the total national income and then individual slices as the proportion that different groups receive. That would mean that if total national income were $1,000 and a society had only five households (people living together), then if every household earned $200, distribution was equal. By contrast, if one family earned $800, then, because $200 remained for everyone else, there would be considerable inequality. Recently, the top quintile of households in the U.S. earned close to 50% of all income. This quintile approach for representing income distribution was developed by statistician Max Lorenz.

You can see Dr. Milanovic’s graph for worldwide income distribution here.

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Elaine Schwartz has spent her career sharing the interesting side of economics. At the Kent Place School in Summit, NJ, she has been honored through an Endowed Chair in Economics and the History Department chairmanship. At the same time, she developed curricula and wrote several books including Understanding Our Economy (originally published by Addison Wesley as Economics Our American Economy) and Econ 101 ½ (Avon Books/Harper Collins). Elaine has also written in the Encyclopedia of New Jersey (Rutgers University Press) and was a featured teacher in the Annenberg/CPB video project “The Economics Classroom.” Beyond the classroom, she has presented Econ 101 ½ talks and led
workshops for the Foundation for Teaching Economics, the National Council on Economic Education and for the Concord Coalition.